Valuing lives equally in a benefit-cost analysis of safety projects: a method to reconcile theory and practice

A value of statistical life (VSL) is used in cost-benefit analysis (CBA) as a monetary measure of the benefits to people from small risk reductions that arise from safety projects. Despite its widespread use in a number of countries, the concept of a VSL remains controversial, not least because it implies acceptance of the underlying ethical assumptions of CBA together with the idea that ‘social welfare’ can be measured and aggregated in some manner. In addition, to comply with theory, variable VSLs for different groups within society would be advocated. However, without fail, empirically, it is the case that those countries that employ a willingness to pay based approach to cost-benefit analysis of a safety project appraisal tend to use a single value for that accident context that is independent of the per capita income level, or indeed other personal characteristics, of the sub-group in society to which the safety improvement will actually apply. This article presents a straightforward, but theoretically justified adaptation to the calculation of a VSL which allows empirical practice by policymakers i.e. the application of a “common” VSL for any particular hazard within a given society, to be compatible with a CBA decision making approach.